Germany puts EIB’s climate ambition at risk with push for loopholes
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Germany puts EIB’s climate ambition at risk with push for loopholes

The EIB’s hopes of becoming Europe’s ‘climate bank’ and its leadership role among multilateral development banks in moving to a cleaner economy are at risk if conservative country shareholders demand further weakening of its new Energy Lending Policy that would ban nearly all fossil fuel lending

Sustainable finance experts calling for strong action on climate change are warning that the European Investment Bank risks being pushed by countries led by Germany into an “incoherent” and “ridiculously risky” policy that would allow it to keep lending to the fossil fuel industry.

This could cast a shadow over the EIB’s evolution into Europe’s ‘climate bank’ and its leadership role among multilateral development banks in moving to a cleaner economy.

“People are going to doubt the new narrative about Europe being a leader on climate change,” said Sandrine Dixson-Declève, co-president of the Club of Rome thinktank. “What is the point if we are still investing in fossil energy?”

On Tuesday October 15, finance ministry officials of EU member states, which own the EIB, had been expected to adopt its new Energy Lending Policy.

The EIB’s first draft of the policy in July was widely hailed as ambitious, as it banned financing fossil fuel projects after the end of 2020.

But the gas industry has lobbied heavily, and countries including Germany demanded that some lending for gas infrastructure be allowed to continue.

The EIB produced a second draft with some loopholes for fossil lending to continue, which was presented to the board on October 15. But the board put back a decision until its meeting on November 14.

Andrew McDowell, EIB vice-president, said in a statement that he was “pleased about the important progress made today and am confident of securing a final approval in November.”

A source said there had not been “a clear north-south, east-west split” at the meeting. “There was full input and discussions from large, coal-powered countries” and “very strong support for the EIB’s ambition, but delegates needed clarification [on many technical points] — it will take a couple of weeks to get that,” he said.

However, specialists following the issue are alarmed at the delay, which they believed had been caused by Germany and others pushing for yet more loopholes.

“Two key things were discussed,” said Xavier Sol, director of Counter-Balance, an NGO. “First, the date of the fossil fuel ban [being pushed beyond 2020]. Second, increased exceptions Germany is pushing for, when there is a strong energy security concern. This would contradict the policy completely.”

Nick Mabey, CEO of the thinktank E3G, said: “Some of the proposals are ridiculously risky.” Pointing out that the EIB had pledged to make half its lending for climate projects by 2050, he said: “Why would any bank want to lend to fossil fuel infrastructure when half of its loans are going to be focused on putting that industry out of business?”

Germany had said it wanted a carbon-neutral economy by 2050, which would mean making the energy industry carbon-neutral by 2040, he said. Any projects that received financing approval after 2040 would not be built till 2025, which would give them only an unrealistic 15 years in which to repay the investment. “Either they are expecting the public purse to pick up the risk, or they are not expecting to be out of fossil fuels by 2040,” said Mabey.

Sean Kidney, CEO of the Climate Bonds Initiative, said: "Every time we build something that is contrary to the Paris Agreement, it makes it much harder. The EIB policy was the right one, in line with the IPCC report on 1.5C. It's extremely unfortunate that a sensible policy, developed soberly, has been delayed as a result of anxieties and the impact on an industry that needs to have an impact made on it."

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